After the stock market started dropping on February 19, 2020 due to the coronavirus pandemic, some investors pulled out of the stock market. Other investors remained invested, but shifted their asset allocations to a more conservative mix of investments. When is it safe for these investors to jump back into the stock market?
The stock market is never really “safe,” but the recovery began on March 24, 2020, about a month after the start of the bear market.
Pulling out of the stock market just locks in losses and causes you to miss out on all or part of the recovery. It is better to remain invested than to try to time the market.
If you blink, the recovery will have already happened and you will miss out on the opportunity to regain some of your losses. If current trends continue, the S&P 500 will be fully recovered in two more weeks and the Russell 2000 will have fully recovered in about a month.
It took about a month for the stock market to drop by about a third. It will have taken about three months for the stock market to fully recover from the bear market. It always takes longer to recover from a bear market than it takes for the stock market to drop.
This chart shows the change in investment returns as compared with where the stock market was at the beginning of the year. It graphs the performance of the S&P 500, Russell 2000, the MSCI EAFE Standard Index (Foreign Stock) and the MSCI US REIT Index (Real Estate).
Mark Kantrowitz is a nationally-recognized expert on student financial aid, scholarships and student loans. His mission is to deliver practical information, advice and tools to students and their families so they can make informed decisions about planning and paying for college.
Mark writes extensively about student financial aid policy. He has testified before Congress and federal/state agencies about student aid on several occasions.
Mark has been quoted in more than 10,000 newspaper and magazine articles. He has written for the New York Times, Wall Street Journal, Washington Post, Reuters, Huffington Post, U.S. News & World Report, Money Magazine, Bottom Line/Personal, Forbes, Newsweek and Time Magazine. He was named a Money Hero by Money Magazine. He is the author of five bestselling books about scholarships and financial aid, including How to Appeal for More College Financial Aid, Twisdoms about Paying for College, Filing the FAFSA and Secrets to Winning a Scholarship.
Mark serves on the editorial board of the Journal of Student Financial Aid and the editorial advisory board of Bottom Line/Personal (a Boardroom, Inc. publication). He is also a member of the board of trustees of the Center for Excellence in Education. Mark previously served as a member of the board of directors of the National Scholarship Providers Association.
Mark is currently Publisher of PrivateStudentLoans.guru, a web site that provides students with smart borrowing tips about private student loans. Mark has served previously as publisher of the Cappex.com, Edvisors, Fastweb and FinAid web sites. He has previously been employed at Just Research, the MIT Artificial Intelligence Laboratory, Bitstream Inc. and the Planning Research Corporation.
Mark is President of Cerebly, Inc. (formerly MK Consulting, Inc.), a consulting firm focused on computer science, artificial intelligence, and statistical and policy analysis.
Mark is ABD on a PhD in computer science from Carnegie Mellon University (CMU). He has Bachelor of Science degrees in mathematics and philosophy from MIT and a Master of Science degree in computer science from CMU. He is also an alumnus of the Research Science Institute program established by Admiral H. G. Rickover.
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